Companies

Chandaria Industries buys stake in low-cost car firm

BDMobius1111

Mobius Motors Limited founder and chief executive officer Joel Jackson (left) and Chandaria Industries director Darshan Chandaria at the Caramel Restaurant in Nairobi on November 10, 2014. PHOTO | SALATON NJAU |

Summary

  • Chandarias’ investment in Mobius marks the entry of Kenya’s manufacturer into the motor industry after nearly five decades in FMCG market.
  • Mobius said it will by next month start delivering the first batch of 50 vehicles pre-ordered by customers last year.
  • Chandaria business empire is one of the biggest in the region with interests in tissue paper, hygiene products, iron roofing, kitchenware — including pots and pans — banking, petroleum, real estate and packaging.

Billionaire businessman Mahesh Chandaria’s family has acquired an undisclosed stake in Mobius Motors, the start-up auto firm that is building Africa’s cheapest car.

Chandaria Industries, makers of hygiene products that are the flagship of the Chandaria Group, made the investment through capital injection into Mobius in return for a stake in the early stages of the car maker, highlighting increased investor interest in the low-cost vehicle market.

The Chandaria Group’s investment in Mobius came just a few months after US billionaire Ronald Lauder, who is worth about $3.8 billion according to Forbes, and former chairman of Citigroup Richard Parsons invested an undisclosed amount of money in the Kenyan motor company.

Darshan Chandaria, a director of Chandaria Industries and a son of Mahesh Chandaria, said his immediate family had invested in Mobius to help the business tap into Kenya’s growing motor market, diversify revenue streams and cut its dependence on hygiene products.

“We’re excited about this investment because Mobius caters for a market segment in which no other firm is playing. Small businesses are looking for a new car that combines functionality and durability at an affordable price and this is what we are providing in Mobius,” he said.

“We have done our research and given it a lot of thought,” said the 29-year-old Chandaria, who brokered the deal.

The Mobius II brand is priced at Sh950,000 excluding VAT or Sh1.1 million inclusive of taxes – making it the lowest priced new vehicle in Kenya.

READ: Kenya made car goes on sale at Sh950,000

The low-priced car is the brainchild of Joel Jackson, a 29-year-old British entrepreneur who has lived in Kenya since 2009.

Mr Jackson was recently included in the Forbes 30 under 30 listing of top entrepreneurs. He graduated in 2006 with a First Class honours degree in computer science from the Imperial College London.

The Chandarias’ investment in Mobius marks the entry of Kenya’s manufacturing oligarch into the motor industry after nearly five decades in the fast moving consumer good market.

The Chandaria business empire (no direct relationship to the Comcraft Group owned by the family of billionaire Manilal 'Manu' Chandaria, who is Mahesh Chandaria's uncle) includes interests in tissue paper, hygiene products, iron roofing, kitchenware — including pots and pans — banking, petroleum, real estate and packaging.

Mr Chandaria said Mobius’ target market is small and mid-sized enterprises (SMEs) in agribusiness, infrastructure and supplies operating in remote rural areas and need a car that can withstand the rough terrain.

“Our target is SMEs in rural areas but this is a machine that can easily be converted into a family car in the evening,” he said.

Lack of affordable commercial vehicles such as pick-ups has forced Kenya’s rural-based SMEs to turn to the Toyota Probox, a station wagon, to ferry goods through the rough rural terrain.

The exit of the iconic Datsun pick-up truck — which dominated the Kenyan market between the 1970s and 1990s — has left a void in this market segment. The trucks were known for their reliability, ease of use and ruggedness.

Mobius is also entering the market just after Land Rover announced plans to stop assembling the Defender model in Kenya next year.

Commercial vehicles such as pick-ups, trucks and buses account for 40 per cent of Kenya’s new vehicles market that has been growing steadily with increased demand from sectors such public transport, haulage and agribusiness.

Mr Chandaria said the car is also targeting the lucrative tourism safari market for rides in the national parks as well as government agencies, especially those located in remote rural outposts.

The Business Daily Tuesday got a rare peek into the Mobius II at the firm’s Nairobi showroom located at Sameer Business Park, off Mombasa Road.

The vehicle has been issued with an inspection certificate after undergoing quality checks by the Kenya Bureau of Standards (Kebs).

Mobius said it will by next month start delivering the first batch of 50 vehicles pre-ordered by customers last year. The rugged automobiles are being assembled by the Thika-based Kenya Vehicle Manufacturers.

READ: Thika firm to start Mobius car assembly

From the outside, Mobius looks like a rugged version of the Land Rover and is designed specifically for off-roading in Africa. The vehicle is stripped of luxuries, including air conditioning, power steering and many internal fixtures.

The Mobius II has a carrying capacity of 625 kg and its body is made of aluminium and fibre composite while the chassis is steel. The load capacity is equivalent to nine bags of maize, six bags of potatoes, about 50 6-kg cooking gas cylinders and several crates of beverages such as soda and milk.

It has a four-cylinder 1,598 cc petrol engine, a 5-speed manual transmission, manual rack-and-pinion steering with a maximum speed of 120km per hour.

Makers of the car said they opted for petrol engine because it is more resilient to the variable quality fuels found in rural areas and easier to maintain compared to diesel.

Mobius II is billed as a fuel-efficient car that covers 14 km with every litre of petrol. Its rugged build means it can reliably handle more degraded roads common in rural areas unlike normal sedans and station wagons.

The car has three doors and with a front seating arrangement of one driver and passenger and six passengers in the rear seating.

The rear seats are foldable and removable, leaving a flat cargo space comparable to a pick-up truck.

Former Safaricom CEO Michael Joseph joined Mobius last year as an adviser, alongside a team of eight industry experts, including former car engineers and designers of top firms like Ford and General Motors.

READ: Michael Joseph joins Kenyan low cost vehicle firm

Greg Bellopatrick, the engineering expert at Mobius Motors, previously served as chief engineer at General Motors. The design expert is Patrick Le Quement, formerly the head of automotive design at Renault.

The investment by Mr Lauder (son of cosmetics entrepreneur Estee Lauder who died in 2004) and Mr Parsons was made through their New York-based and Africa-focused private equity firm Pan-African Investment Co. (PIC) which targets high-impact enterprises on the continent.

Mr Lauder, whose worth is estimated at $3.8 billion (Sh330 billion) by Forbes magazine, made his money from cosmetics giant Estée Lauder and served as US ambassador to Austria from 1986 to 1987.

“The Mobius vehicles will create a transport platform empowering local entrepreneurs and villagers. PIC is pleased to be working with Mobius to help create value in the company while driving job growth and entrepreneurism in Kenya,” said Dana Reed, chief executive of PIC in an earlier statement.

Chandaria Industries Ltd is the largest company in the Chandaria Group of Companies run by Mahesh and his sons Darshan and Neer.

The other firms in the group are Tanpack Tissues Ltd, Chandaria Industries (Tanzania) Ltd, Chandaria Industries Ltd (Thika Division), Madhupaper Kenya Ltd, Guardian Bank Ltd, Global Petroleum Ltd (Kenya), Fine Holdings Ltd, Auger Investments PLC and Vista Packaging Pvt Ltd.